London Calling: ST's world of pain

ST, despite having announced its decision to get out of the struggling joint venture ST-Ericsson in December, has reported more losses, more JV-related costs and forecast a poor first quarter of 2013.

STMicroelectronics NV, Europe's largest and broadest chip company continues to suffer under the burden of its wireless joint venture with Ericsson. ST announced in December that it planned to be out of the joint venture by the 3Q13.

However, that is only little comfort to shareholders today. ST made a net loss of $428 million, mainly due to a $544 million charge for the impairment of goodwill and other intangible assets at ST-Ericsson. ST has also excused its subsidiary of the need to pay back just over $750 million of debt built up over the last three years of losses.

ST announced fourth quarter net revenues of $2.16 billion roughly flat with 3Q12 and marginally down from $2.19 billion in 4Q11.

And ST expects 1Q13 to be a poor quarter with a sequential decrease of about 7 percent, partly on the forecast of poor sales at ST-Ericsson in 1Q13.

On top of these burdens ST stated that it now expects the exit of ST-Ericsson to cost in between $300 million and $500 million over the period to whenever the exit is achieved.

Carlo Bozotti, CEO of ST, said that semiconductor conditions are expected to improve in 2013, driven by a more favorable economic environment. "In particular, we expect imaging, microcontrollers, analog and MEMS to be the highest contributors to our revenue performance," Bozotti said in a statement.

For the full year 2012 ST made a net loss of $1.16 billion on sales of $8.49 billion, which compares to a net profit of $650 million on sales of $9.73 billion in 2011.

I don't think FD-SOI is the savor, the technology will do well but the real savor will be European Union...they can't afford the last European semiconductor company to fail (Infineon is too specialized to count and ARM doesn't have manufacturing), they will ensure ST has enough orders from within the union

What eewiz said.
The background is complex...and can probably be traced back to PP's very successful key accounts structure in the 1990s, of which Nokia was one.
But what was a successful backing of a few market leaders to gain system knowledge and make IC sales with hindsight we can see became an over-reliance on too few customers. If one of few customers makes a mis-step so does the supplier.
ST was keen to be an aggregator and not an inveterate pruner of divisions which gave the company the appetite to try assembling a European best-in-wireless.
But with Nokia as the anchor customer this has been problematic.
Unless FDSOI can arrive in time to save ST's and ST-Ericsson's digital aspirations.

Peter,
I donīt see ST in a bad position, even with the ST-Ericsson situation.
The company has a good revenue level, a considerable cash generation and a reasonable debt structucture. Considering that some competitors have a much bigger debt structure, ST is in a much better situation. And added to fact that ST has been very succesful in several markets, in my opinion, ST has a long life in the Market. Donīt you think so ?

It would...so some signs of progress there.
BUT...but ST has also had to say goodbye to $750 million that ST-Ericsson owed and which ST will not now get as and when they sell off their share.
And Carlo Bozotti is saying that it could cost $500 million from this point for ST to divest itself of its share in ST-Ericsson.
And one analyst thought this figure seemed low.
So that is more than a billion-dollars of pain to last through 3Q13....Maybe 2014 will be better.